When you go into a dealership, you want to know all of the pricing and costs of the car that you are considering to buy.

You need to first calculate the cost of the car to the dealer and then make a reasonable offer if you want to get somewhere. You should also know that the dealer’s price is not the invoice price from the factory. The dealer’s cost is actually much lower than the factory’s cost.

In order to make a fair offer to a dealership, you need to learn to read a factory’s invoice. Here is what you can expect to find on the factory invoice.

• Base model of the car on it
• All of the options packages
• Destination charge
• Holdback and dealer flooring help

Quick Tip: DO NOT confuse the invoice with the MSRP (Manufacturer's Suggested Retail Price) window sticker because they are not the same.

Dealers don't have to show you the invoice on any car, but if they refuse you can go online to find the invoice price or go to another dealer. There are hidden factory incentives in the invoice price that lower the cost of the car for the dealership. The invoice isn't the dealership's true cost, so it should be your highest starting point for negotiations.

There can be several thousand dollars of factory rebates available to the new car dealer as well as advertised rebates available to the buyer. Knowing this before you walk into a dealership can be your best negotiating strategy.

To calculate what your offer should be to the dealership, you should get the factory invoice price (don't forget to include the options in this price), and subtract any known rebates from that amount.

CAR DEALER’S COST - ANY BUYER REBATES = YOUR FIRST CAR OFFER

You may not get the new car for that price, but that's why it's called a negotiation. Make your offer and see what happens. Depending on how much they want to sell you the car they may or may not accept your offer.

If you are unwilling to pay more than your opening offer, let the salesperson know that your offer stands firm and how they will profit from the offer. As stated earlier, the dealer makes money from a variety of factory incentives including individual model incentives and factory sales quota incentives. In addition, since the factory charges the dealer interest on cars that sit on the lot, they save money by selling the new car. Lastly, the dealer makes money through ongoing service appointments.

The car dealer will likely give you another price and ask you to meet them halfway. In the end you will get the car you want on your own terms. Here's an example of this process.

You are hoping to buy a Toyota Camry. You do your research at and find that the invoice price is $19,922; MSRP is $22,385. You learned by researching that there is a $500 factory to dealer incentive.

Based on the above calculations, the dealer’s cost is $19,922 (invoice) - $500 (incentive) = $19,422. This should be your first offer. Even if you go up by 5% you'll still save more than $2,000.00.